China, the former sleeping giant, has climbed another rung up the ladder of global dominance by overtaking Japan as the world’s second largest nation of at-home internet users.

According to the latest survey by Nielsen/NetRatings, 56.6 million Chinese citizens now access the internet from their homes. But this is only the tip of the iceberg: Chinese internet penetration remains at a mere 5.6% of the population with mind-boggling growth potential; whereas in Japan and the USA (still the world leader) penetration stands respectively at 36% and 54%.

Says an awed Hugh Block, Nielsen/NetRatings managing director in North Asia: “It's the second-biggest market in the world. That should be an eye-opener to a lot of people.” And, according to the Chinese information ministry, the numbers are growing at between 5%-6% monthly.

However, the internet is still a largely urban phenomenon in China, where households are smaller. Comments Ted Dean of Beijing information consultancy BDA China: “Penetration numbers are always a little misleading … because of the numbers of people involved. There is obviously a great deal of optimism about this potential,” he adds, while warning that launching a solid internet businesses in the vast nation “is a longer process than many people imagined.”

The NNR survey reveals that China's most popular online activity is reading newspapers or magazines. Forty-one percent of users who have accessed the web in the past six months are 16 years or older, while email is the second most favored pastime at 39%. Commercial usage, however, is still in its infancy with just 6% of surfers engaged in online stock trading and 3% in online purchases.

Data sourced from: The Wall Street Journal Online; additional content by WARC staff